Exchanges are in part responsible for creating the conditions that have benefited high-frequency trading firms and caused structural inefficiencies and market unfairness, the chief executive of trading venue IEX Group told the House of Lords.

Brad Katsuyama, CEO of alternative trading venue IEX Group, yesterday gave evidence to a House of Lords Economic Affairs Committee session on high-frequency trading, during which he explained how he believes markets are rigged and what can be done to remedy the situation.

Katsuyama, who participated via video link, pointed his finger at exchanges and their decision to sell certain technologies as one of the reasons behind market structure issues, which he believes have turned the markets against the end investor.

He said: “When you start to sell technology, you automatically become biased to a certain outcome happening. You are no longer neutral, your bias becomes that you want the person who buys your technology to win more than they lose and, as a result of a shift in priorities, I think here is where we have ended up.”

Technologies that exchanges sell to trading firms include co-location services, which allow trading firms to locate their computer servers next to an exchange’s matching engines, thus gaining a speed advantage; and faster data feeds, which allow firms to trade quicker on market information.

Katsuyama and IEX have drawn global attention since the publication of Michael Lewis’s latest book Flash Boys, in which the author claimed US equities markets were being rigged by high-frequency traders front-running trades to obtain better prices than other investors.

HFT firms use computer technology to dip in an out of markets in fractions of a second.

New York-based IEX comes in for praise in the book for helping to level the playing field between HFTs and other firms by introducing a time delay on its venue.

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Questioned by the committee on whether he believed markets were rigged, Katsuyama said: "I think that [because of] the way the markets have been designed certain players are definitely disadvantaged. So rigged is probably one of many words that can be used to describe the situation.”

Although the issues surrounding high-frequency trading have been the matter of debate for several years, the book has drawn greater attention from regulators and the wider public to the practice.

Market participants remain deeply divided on whether HFTs are helping to tighten spreads and provide liquidity or creating more market volatility and instability.

Those in favour of HFTs argue that they have led to faster and cheaper trading.

Katsuyama, a former Royal Bank of Canada trader, told the committee he believed HFTs should not be credited with the benefits that have derived from electronic trading in general.

“Technology was going to inevitably deliver these benefits and I don’t think that ascribing them to high-frequency trading is necessarily the right way to look at why today’s market is better than 20 years ago,” he said.

A lot of the debate surrounding high-frequency trading is centred on the fact that there is no exact definition of the practice, meaning that the term is used both to describe market-making strategies and predatory trading.

The Canadian-born chief executive told the committee that the current debate on the definition and its vagueness has helped some HFTS get away with predatory behaviour.

He said: “They can lay claim to the benefits that computerised trading and technology has brought, without really answering any questions about their own specific strategies and whether they may be predatory.

“The fact that the definition is broad allows the industry to talk in circles, allows some people who are predatory to claim that they are not and probably that is why five years later we are still talking about the same things.”

Asked by members of the committee what should be done to solve these issues, Katsuyama said regulation can only go so far but that his firm is asking that regulators demand more disclosure and transparency from market participants.

He said: “The asset managers that are giving orders to brokers need to exert greater control over how their orders are handled. Many of these clients have asked for data on how their orders are being handled and have not been able to get it. I think that is a significant problem and something we are pushing the SEC for greater disclosure on information.”

• Correction: An earlier version of this story described Brad Katsuyama as a former Royal Bank of Scotland trader. He in fact previously worked at Royal Bank of Canada.